Fine-tuning plans for WNIB

A new score? Drew Horowitz, regional vice-president at radio giant Bonneville International, says the company has made no decisions about whether to change formats at one of its newest holdings, Chicago classical music station WNIB-FM. Photo: Steve Leonard

As classical music fans lament the expected disappearance of Brahms and Beethoven from WNIB-FM, the station's new owner is straining to find a clear marketing channel in the crowded local radio business.

"There really are no glaring holes in the radio market that we see," says Drew Horowitz, regional vice-president of Bonneville International Corp., the Salt Lake City-based chain that has agreed to buy one of Chicago's two classical stations for an eye-popping $165 million.

Industry analysts insist that a classical format won't produce sufficient ad revenues to justify such a price, and Bonneville will have to chase the younger listeners that advertisers covet. But most of the musical formats geared to young audiences are already represented on the Chicago radio dial.

Acknowledging the fierce competition here, Mr. Horowitz says Bonneville has made no decisions on a format, and wouldn't rule out keeping the classical format.

"We have research in the field, and until we get that back, we won't know the viability of classical or other formats," he says.

The only "open lane" here among formats appealing to young listeners was filled in late November when Walt Disney Co.'s ABC Inc. flipped its WXCD-FM from classic rock to an all-'80s format, making it one of more than 30 stations around the country to make that switch in recent months.

Bonneville now must choose between competing with WXCD in the '80s format or finding another genre  perhaps Top 40, which is regaining popularity nationally but could poach listeners from other Bonneville stations in town.

Either format would generate a better return on Bonneville's investment than would classical, a narrow niche split in Chicago between WNIB and WFMT-FM.

Duncan's American Radio, a Cincinnati-based firm that analyzes the financial and ratings performance of radio stations, estimates WNIB's 1999 ad revenues at $5.9 million, and WFMT's at $5.1 million.

Bonneville's competitor-free classical station in Washington, D.C., sold $11.8 million in ads, Duncan's estimates, and the biggest-grossing classical station in the country  New York's WQXR-FM  had $13.4 million in revenues.

Eye-popping multiple

But even revenues on par with the New York station's would produce a paltry payoff for Bonneville, says Tony Sanders, Duncan's senior analyst.

One way of evaluating a sale price is as a multiple of cash flow, he says. Assuming an industry average cash flow at 50% of ad revenues, Bonneville paid a staggering 55 times cash flow for the station, far above the 15 multiple common in the industry.

"To justify a purchase price like this as a multiple of cash flow, you'd need to generate ad revenues over $20 million, which will not come from this format," Mr. Sanders says. All 14 of the local stations that generated $20 million or more in revenues in 1999 were either AM news or talk stations or popular music stations on FM.

Mr. Horowitz points out that unlike the other local radio kingpins  including ABC, New York-based CBS Corp's Infinity Broadcasting Corp., Clear Channel Communications Inc. of San Antonio and Chicago's Tribune Co.  the Mormon Church-owned Bonneville does not have to answer to shareholders.

"Because we don't live a quarter-by-quarter existence, we can spend the money on research, marketing and investing in people that other stations used to spend," he says.

WXCD's switch

Still, he acknowledges a need for fiscal responsibility, pointing out that the company's other local stations  classic rock station WLUP-FM, adult contemporary station WNND-FM and "hot" adult contemporary WTMX-FM  are profitable.

When ABC's WXCD made the switch to all-'80s on the same day Bonneville announced the WNIB purchase, several reports speculated that Disney's move was a pre-emptive strike.

Zemira Jones, ABC Radio Chicago's president and general manager, called those reports naive, insisting that the switch was driven by the realization that WXCD would never overtake WLUP as Chicago's top classic rock station.

"We didn't need to know what any other broadcaster was doing to know that this was a major format with a lot of potential, and that it would only be a matter of time before somebody decided to fill it," says Mr. Jones.

If Bonneville wants to shift to a contemporary hit radio  Top 40  format, it faces other obstacles. Although it is more rhythmic and less pop-oriented than a traditional Top 40 station, CBS's WBBM-FM and its 1.5 million listeners dominate the 18-to-24 age group. And Bonneville's top-grossing station, WTMX, also serves that demographic.